Brussels, 23/11/2012 (Agence Europe) - The leaders of the EU were unable, on Friday 23 November, to reach a compromise on the multiannual financial framework for 2014-2020. The last compromise text by Herman Van Rompuy did not convince the heads of state and government. Some countries, like the United Kingdom and the Netherlands, asked for greater cuts while others, such as Italy, wanted improvements to be made, especially on cohesion. France was opposed to any scaling down of agricultural expenditure.
British Prime Minister David Cameron is one of the main obstacles to concluding an agreement, saying it is necessary to cut down on spending that one cannot afford. Van Rompuy has suggested a total budget of €972 billion, i.e. 1.01% of the European GDP. Cameron hopes to bring that down to €940 billion. One French commentator said this was “clearly insufficient” for the common agricultural policy (CAP).
German Chancellor Angela Merkel was quick to declare that she did not believe it was possible to reach an agreement on the European budget this time round. She went on to say (our translation): “I have always said that it was not dramatic if we consider today as a first stage” and “if we need a second round, then we must give ourselves time for that”. “We are really not there yet”, said the Dutch prime minister, Mark Rutte, who is one of Cameron's allies, on seven occasions. Their tough line is also held by prime ministers Fredrik Reinfeldt of Sweden and Jyrki Katainen of Finland.
Details of the text on which the Council failed to agree are given below (and can be found on Agence Europe's Twitter account, @AgencEurope.
The text relates to total expenditure of €971.9 billion, i.e. 7% less than the initial European Commission proposal (€1,047.7 billion). This makes around €80.2 billion less compared to the Commission's initial proposal. The second compromise is less severe than the first on agricultural spending and cohesion policy. It therefore reduces the other Headings more, especially Heading 1a on “competitiveness” but also the Heading on “security and citizenship” and that dedicated to “external actions”. The compromise of the heads of state and government should not be very far from the text although margins of manoeuvre exist for reductions in Heading 5 on “administrative spending”.
Heading on competitiveness. It is at the cost of this first Heading that the president of the Council has rebalanced budget cuts. Policies for growth and employment would have €139.54 billion allocated to them instead of €152.65 billion in the previous proposal. Compared to the current financial framework, this nonetheless represents an increase of 50%.
Van Rompuy has cut considerably into the Connecting Europe Facility (CEF), that he had nonetheless spared in his first proposal. The cursor for the CEF would henceforth be €41.2 billion, i.e. €5 billion less than the previous proposal from the president that had already trimmed down the instrument (€50 billion in the initial Commission proposal). This mechanism should finance European infrastructure, and more especially the missing cross-border sections. Transport infrastructure would still have €10 billion under cohesion funding but in total would now have no more than €27 billion, compared to nearly €30 billion in the first Commission proposal. The energy and telecommunications sectors would receive €7.1 billion, i.e. a reduction of €1.1 and €1.2 billion respectively. Although infrastructure investment seems to come out the loser in this new proposal, one should bear in mind that the CEF is a new instrument created for the next multi-annual financial framework and that, in comparison with the current multiannual financial framework, it is nonetheless a matter of increasing 100% of the funding volumes of those sectors.
The three other infrastructure projects - Galileo, ITER and GMES - will be financed up to €12.7 billion, i.e. an additional loss of one and a half billion in comparison with the Council president's first proposal. The GMES programme was the one that paid the most (-€1.1 billion).
Heading 1b Cohesion. In his new proposal, Van Rompuy returns to his first cuts in Cohesion Policy. He considerably waters them down and envisages a series of hand-outs for some ten member states.
He brings up total spending for this Heading to €320.1 billion, i.e. a rise of €10.6 billion compared to the first cuts presented. This, however, represents a substantial reduction (-€18.8 billion) compared to the initial proposal. All the categories of regions do well out of it but the transition regions do less well: €161.4 billion for the less developed regions (i.e. +5.2), €31.3 billion for the transition regions (i.e. +2.2), and €50.8 billion for the most developed regions (+3.3).
The method of calculating allocations for the most developed regions was reviewed downward, however, with €19.8 per year per capita for aid intensity (compared with 20.4). That was not the case for the cohesion fund which goes from €45 to €48 per person in the new proposals put forward by Van Rompuy. The very outlying regions with scarce population could benefit from a special, increased allocation, i.e. €30 per inhabitant per year (compared to €20 in the previous proposal).
The capping of cohesion funds has been reviewed downward, from 2.4% to 2.35% of GDP of the member states concerned. However, in order to counterbalance the effects of the crisis, the countries in recession (whose growth was -1% in 2008-2010) may benefit from capping at 2.59% compared to the GDP of those countries. Countries concerned include Greece, Spain and Portugal. Other purely national envelopes have been granted under this Heading by Herman Van Rompuy, for the sum of around €1 billion, as “special allocations”. That is the case for Greece (€1 billion), Portugal (€1 billion), Spain (€1 billion), France for the island of Mayotte (€200 million), Hungary (€1.2 billion), Italy (€1 billion), Malta (€200 million) and Cyprus (€150 million).
The safety net is put up from 57% to 60%. Also, the reverse safety net, borne by Germany, reappears and would cap national allocations at 10% more than their current level (compared to 15% initially foreseen). Finally, all co-funding levels for the cohesion fund and the least developed regions have been reviewed upward with 5% if not 10% more, oscillating between 80% and 85%. The transition regions, on the other hand, remain at 60% and the least developed at 50%.
Aid to the poorest. The compromise is counting on €2.1 billion, i.e. €400 million less than what the Commission is proposing. This aid will be financed by the European Social Fund, and no longer by the CAP.
Heading 2 natural resources. Compared to the first compromise by the president of the European Council, the second proposal adds €8 billion to this Heading, taking it to €372.2 billion, of which €277.8 billion (in constant 2011 prices) over the 2014-2020 period for direct payments and market measures. The Commission was initially counting on €283.051 billion for agricultural spending under the first pillar.
One chapter is devoted to the level and to the model of redistribution of direct support. In order to adjust the overall level of spending while respecting the principle of gradual rise in direct aid foreseen in the accession treaties, the average rate of direct payments in the EU for current per hectare prices will be reduced over the period. The direct support will be distributed more fairly between member states. This convergence will be financed by all member states with direct payments above the EU average, proportionately to their gap from this average. This process will be implemented gradually over six years from the 2015 financial year to the 2020 financial year. One novelty is that all EU countries should benefit at least from aid per hectare of €196 by 2020.
Capping of the support for the large farms will be introduced by member states on a voluntary basis. On the greening of direct payments, member states will use 30% of the annual national ceiling, with clearly defined flexibility for member states concerning the choice of greening measures. This “flexibility” could bring into question the consistency of the Commission proposal on greening.
Flexibility between the two CAP pillars. Member states may transfer towards direct payments up to 15% of their envelope for rural development (second pillar) over the period 2015-2020, and inversely (over the period 2014-2019). Furthermore, the amounts transferred to the second pillar would not be co-financed.
For rural development, €83.666 billion are foreseen over the seven-year period, i.e. a fall of 9.03% (-€8.3 billion) compared to the Commission's proposal. However, the last text provides for hand-outs by way of €2.4 billion in favour of a number of countries (including €1 billion for Italy, and €700 million for Austria).
The crisis reserve for the agricultural sector will be integrated into the budget chapter devoted to CAP up to €2.8 billion.
Heading 3 citizenship. The compromise is based on the sum of €16.6 billion (€18.3 billion in the first compromise and €18.8 billion in the initial proposal).
Heading 4 Europe in the world. The amount foreseen for external action is by way of €60.6 billion, i.e. €11.9 billion less than what the Commission had proposed.
Heading 5 administrative spending. In total €62.6 billion are earmarked for this, i.e. €536 million less than the Commission proposal.
The revenue side of the budget. The total amount of own resources allocated to the EU budget to shall not exceed 1.23% of the sum of all the member states' GNIs (for covering payments) and shall not exceed 1.29% (for commitments).
“The existing correction mechanism for the United Kingdom will continue to apply.” The UK rebate was €3.6 billion in 2011. Temporary corrections (rebates) shall be made of €2.8 billion for Germany, €1.5 billion for the Netherlands and €325 million for Sweden. All corrections (the United Kingdom correction and the temporary lump sum corrections) will be fully financed by all member states based on the GNI key. (MD and LC/transl.fl)